$ Index, Have to Take What the Market Gives....

In the $ index, the longer term bullish view remains in place with further gains toward the targets over the last few months at 81.85/00 (50% retracement from the March 2009 high at 89.60), and potentially even an approach of that 89.60 high still favored. Note too that the weekly macd remains in buy mode (see bottom of weekly chart below), adding weight to this bigger picture bullish view. However, this longer term upside is likely to see some fairly significant pullbacks/consolidations along the way (few months or more), and one may indeed be occurring (or at least close, see shorter term below). Switched the longer term bias to the bullish bias on Dec 4th at 75.90 and for now, would maintain that bias.

Nearer term as mentioned above, the market appears to be within (or at least fairly close) to a more extended period of correcting lower (at least another month). Note that the market appears to be within the final upleg in the rally from the Nov low at 74.25 (wave 5, see numbering on daily chart/2nd chart below), technicals are deteriorating (see sell mode on daily macd at bottom of chart), and the seasonal chart points lower into early May (see 3rd chart below). However, there are still no signs of such a high “pattern-wise” or that this multi-week period of ranging is “complete” (5 waves down on short term chart for example), while longer term resistance is just above the 81.35 high at 81.85/00 (markets have a way of reaching these key longer term areas). Note too that this period of consolidating could just be a further extension of this period of relatively tight ranging (shallow pullback). The bottom line is that you just have to take what the market is giving. In this case that means trading with a shorter term bias (too short for these emails), fading key support/resistance areas and then aggressively trailing stops. Nearby support is seen at 79.85/00 (both the multi-week bullish trendline, and the bullish trendline from early Dec), resistance is seen at 80.85/95, the 81.30/40 high and the more important 81.85/00.

David Solin
Foreign Exchange Analytics
http://www.fxa.com

Disclaimer: The opinions expressed herein are those of the author and not a recommendation to buy or sell specific securities.